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What are differences between EBITA and operating income?
The major differences between EBITA and operating income are as follows −
EBITDA is defined as sum of EBIT, depreciation and amortisation (or) sum of net profit, taxes, interest, depreciation and amortisation.
It tells about company’s profit earning capacity.
The earning capacity of an organisation is calculated.
It is not recognised by GAAP.
The adjustments are made (depreciation/Amortisation).
It is calculated prior to operating income calculation.
Operating income is defined as difference between net sales, cost of goods sold and operating expenses.
It tells about the profit earned due to operating activities.
It calculates how much revenue is converted into profit.
It is recognised by GAAP.
No adjustments (depreciation/amortisation) are required.
It is calculated after EBITA calculation.
- Write the difference between Net operating income and net income.
- Compare EBIT and operating income.
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